Urban Shopping Patterns Indonesia Implications

Urban shopping patterns in Indonesia
and implications for food security

Nicholas Minot, Randy Stringer, Wendy Umberger, Wahida
Meeting Food Security Goals with Good Policy

26-27 June 2013
Medan, Indonesia
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
Outline
Background on transformation of diet & agriculture
Objectives & design of urban consumer survey
Patterns of urban shopping behavior
Model of purchases from modern food outlets
Projections of role of modern food outlets
Implications for high-value agriculture
Conclusions
Background
Transformation of diets in Indonesia
Declining importance of rice and other staples

Growing importance of processed food products
Growing importance of high-value food products
Animal products: meat, dairy, eggs, fish

Fruit
Vegetables
Causes: rising income and urbanization
Transformation of agricultural markets
Growing importance of high-value agriculture

Rapid growth of supermarkets & other modern retailers
Larger role of processors
Need for vertical coordination to match supply with qualitysensitive demand
Causes: diet transformation, trade, foreign direct investment
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
Evidence of transformation
Growth in modern food retail sector in Indonesia
12% annual growth in number of supermarkets &
hypermarkets
Much faster growth among minimarts
Modern sector represented 11% of food retail sales in 2009
Lower share for modern sector than many other Asian
countries
Food
category
Number of outlets in Indonesia
Annual
growth
1999
2004
2009
1999-2009
Hypermarkets
18
34
141
23%
Supermarkets
636
695
1,162
6%
Minimarts
533
1,435
10,039
34%
1,176
2,163
11,342
25%
Modern total
Source: Dyck et al (2012) based on data from Euromonitor.
Effect of transformation on food security

Potential effects on three groups: consumers,
competitors, and farmers
Effect on urban consumers
Greater access to processed food with higher levels of sugar,

salt, and fat
Possible effect on diet and obesity
Some evidence of this (study of supermarkets in Honduras)
Effect on competitors
Growth of supermarkets will displace traditional shops

Possible effect on employment, income, & nutrition of families of
shop owners and employees
10
Effect of transformation on food security

Effect on farmers
Supermarket chains establish structured supply chains

Regular suppliers, sometimes with contracts
Private quality and food safety standards
Preference for larger suppliers that can supply throughout year
Opportunities for small farmers

Technical assistance to improve yield and quality
Higher prices
High-value crops provide better return on small plots
Challenges for small farmers

Need to meet higher quality standards
Need to achieve minimum quantities
Risk of being excluded from growing lucrative markets
11
Overview of project
Project title:
Markets for high-value commodities in Indonesia:

Promoting competitiveness and inclusiveness
Funding:
ACIAR
Implementation: IFPRI, University of Adelaide, ICASEPS, CAPAS,
Michigan State University
Objectives:
Study determinants and outcomes of participation of farmers in modern

market channels
Explore patterns of urban consumer demand
Identify policies to promote the competitiveness and inclusiveness
Build research capacity
Activities
Surveys of farmers of chilies, shallots, mangoes, mangosteen, & shrimp

Survey of urban consumers in three cities
Value chain studies
Training and capacity building
12
Design of urban consumer survey

Sample
1180 urban households in three cities

Stratified three-stage random sample
Over-sampling of higher-income households
Over-sampling of neighborhoods near supermarkets
Sample weights compensate for over-sampling in results
Surabaya 600
households
Bogor 280 households
Surakarta 300 households

13
Design of urban consumer survey

Questionnaire
16-page questionnaire
Household member characteristics

Assets and housing
Shopping attitudes and behavior
Food & non-food expenditure
Perceptions
Attitude toward certification
Nutrition status
Data collection
33 enumerators in three teams
Nov 2010 to Feb 2011
14
Types of food outlets

Type
Definition
Hypermarket
Very large, modern stores

with 10 or more cash
registers. Examples:
Carrefour, Giant, Macro,
and Hypermart.
Supermarket
Medium or large modern

stores with 3-9 cash
registers. Examples: Hero,
Matahari, Asia, and Yogya.
Minimarket
Small, modern stores with

1-2 cash registers.
Examples: Alfa and
Indomaret.
15

Type
Definition
Semipermanent
stand
Vendor who sells from a table,

stand, cart, or stall that can be
moved, but generally stays in one
place during the day. Does not
include vendors in a wet market .
Small shop
(warung)
Small store selling food products in

a building or part of a house, often
located in a residential area.
16

Type
Definition
Traditional
(wet)
market
Collection of numerous food

vendors under one roof or in one
location, usually renting space in
the building
Peddler
Small-scale vendors operating on

foot, on bicycle, with a cart, or from
a car/truck, who moving around
during the day.
17
Food shopping patterns

Frequency of using each type of food outlet
(percent of urban households)
SemiSmall
perm.
shop
stand (warung)
Traditional
market Peddler
Hypermarket
Supermarket
Minimarket
Every day
41
35
26
16
2-6 times/week
11
15
32
18
30
15
Once a week
14
16
11
14
13
11
2-3 times/month
17
15
10
10
11
Once a month
20
21
18
13
10
13
Few times/year
19
18
12
13
13
12
Never
47
46
27
20
13
23
Total
100
100
100
100
100
100
100
100
Total
18

Main mode of transport to each type of food outlet
(percent of urban households that use this type)
SemiSmall
perm.
shop
stand (warung)
Traditional
market Peddler
Hypermarket
Supermarket
Minimarket
On foot
32
49
92
39
99
52
Bicycle
Motorcycle
60
57
54
37
36
31
Car
16
13
Public transport
15
19
14
Taxi or ojek
Other
100
100
100
100
100
100
100
100
Total
Total
19

Main reason for using this type of food outlet
(percent of urban households that use this type)
Hypermarket
Supermarket
Minimarket
Semiperm.
stand
Low price / value
19
29
21
26
11
45
10
23
Variety of foods
29
23
12
10
22
13
Easy to get to
11
16
47
49
77
19
70
45
Other
41
33
19
16
10
14
18
Total
100
100
100
100
100
100
100
100
Small
shop
Traditional
market Peddler
Total
Other reasons for going to hypermarket or supermarket include

close to entertainment, provides discounts, high quality food, and
cleanliness
20
Food expenditure data

Food expenditure module
67 food categories
7 rice and other grain products

3 beans, soy, and tofu
12 animal products
23 fruits and vegetables
22 other (spices, beverages, etc)
Questions on
Change in consumption over
past five years
Frequency of purchase
Normal amount of purchase
Main type of store where
bought
21

Share of food spending by type of food outlet
(percent of urban food expenditure)
Modern
outlets
account for
19% of food
spending
22

Share of food spending by type of food outlet and food group
100%
90%
Other
80%
Peddlers
70%
Traditional wet mkt
60%
Small shop
50%
40%
Semi-perm
30%
Minimarket
20%
Supermarket
10%
Hypermarket
0%
23

Food products for which more than 50%
of spending at modern retail outlets
Food product
Infant formula & nutr
Spreads
Other dairy products
Other cooking oils
Other fresh and froze
Apple
Other milk
Fats, butter, and mar
Chocolate, meisus, an
Alcoholic beverages
Chili sauce and other
Breakfast cereals
Processed meat
Other processed food
% from
modern
outlets
92
91
84
68
68
67
67
65
63
59
57
57
51
51
Other food products of interest

Food product
Mango
Mangosteen
Shrimp
% from
modern
outlets
7
10
11
Food products for which less than 4%

of spending at modern retail outlets
% from
modern
Food product
outlets
Other seafood
5
Onion
5
Meals eaten outside home
4
Poultry
4
Maize products
4
Other meats
4
Fish
4
Pineapple
4
Rice
3
Potato
3
Other spices and seas
3
Processed fish & seaf
2
Ready-to-eat meals
2
Tofu and tempe
2
Green bean (buncis)
1
Tomato
1
Carrots
1
Garlic
1
Tubers
1
Chilies
1
Leafy green vegetable
1
Long bean
0
Shallots
0
Cucumber
0
24

Share of food spending by type of food outlet and income
25

Share of food spending by type of food outlet and education
26

Share of food spending by type of food outlet and city
27
Determinants of share of food spending at

modern retail outlets
What factors influence
1. Rising share of households using modern food outlets
2. Rising share of spending at modern outlet by customers
Determinant
Effect on use of
modern outlet
Effect on spending at
modern outlet
Per capita expenditure (log)
++
+++
Per capita expenditure (log squared)
--
---
+++
+++
+++
+++
Own refrigerator
+++
+++
Own motorbike, car, or truck
+++
Time to get to nearest modern retailer (min)
Surabaya
++
Bogor
++
Household size
Female-headed household
Education of head of household

Working wife
28
Effect of income on..

share of households
shopping at modern
retailers?
5
10
20
Per capita expenditure (m IDR)
50
100
.2
0
.1 .2
.3 .4 .5 .6 .7 .8
.9
0
1
Distribution of households by per capita expenditure
Share of food spending at modern outlets
.2
.4
.6
.8
0
1
Distribution of households by per capita expenditure
.2
share of food budget

spent at modern retailers?
5
10
20
Per capita expenditure (m IDR)
50
100
29
Projecting evolution of food retail sector

Income
growth
Population
growth
Urbanization
Rising
urban
population
Increased
ownership of
motorbikes &
cars
Increased
number of
modern
outlets
Increased demand for

food quality, safety,
etc. of modern outlets
Increased access to
modern outlets
Rising share of
households using
modern outlets
Rising spending at
modern outlets
among customers
Rising total spending at modern food outlets

30

Key assumptions in making projections
Urban population growth: 2.5%
World Bank & UN, http://data.worldbank.org/indicator/SP.URB.GROW
Per capita income growth: 5.5%
Projection 2010-14, http://devdata.worldbank.org/AAG/idn_aag.pdf
2011
Per capita income
Modern outlet share
Modern outlet share
As incomes rise, households will follow patterns of higher

income households today
2020
Per capita income

31

What is the projected total urban expenditure at
modern food outlets?
Taking into account income growth (5.5%), urban population growth (2.5%),
and declining share of food in total expenditure
Total food
expenditure at
modern outlets
grows from 100 to
235 trillion Rp per
year, 135% growth
or about 9% per
year, .
32

What is the projected total urban expenditure on food
(modern and traditional)?
but food
expenditure at
modern outlets
remains no more
than one-quarter of
total food
expenditure over
next ten years.
33
Implications for impact on farmers & food

security
We project that the share of urban food spending at modern retailers will
grow from 19% to 25% over 10 years
Combined with urban population growth (2.5%) and income growth (5.5%),
this implies strong growth in modern outlet sales, which would increase 135%
over 10 years or 9% per year
Although the modern sector share is expected to rise, this does not imply that
the traditional sector will shrink. Indeed the traditional sector is expected to
grow 67% over 10 years (5% per year).
Currently, less than 5% of urban vegetable purchases are at modern retail
outlets. Thus, supermarket quality and food safety requirements currently
have little effect on vegetable growers.
On the other hand, about 32% of urban fruit spending is at modern retail
outlets. Apples and oranges tend to be purchased at modern outlets, while
mangoes, papayas, and other fruit are purchased at traditional outlets.
34
Other results
Chili channel choice (Sahara et al)
Survey of 600 chili farmers in the highlands of central Java
Participation in the modern channel (supermarkets) is linked to proximity to
road, more education, and younger farmers
Participation is not related to farm size, irrigated area, or ownership of assets
(other than storage facility).
Farmers who participate in the modern channel have 75% higher incomes,
even after controlling for education, assets, and farm size.
However, participation in the modern channel is still quite rare: just 3% of the
random sample of chili farmers sell to supermarkets.
Shallot farmer survey
Survey of 600 shallot farmers on north coast of Java (Brebes & Tegal)
More than two-thirds of the sales involve selling shallots in the ground (trader
hires labor and takes responsibility for harvesting)
Main quality criterion is size larger shallots get a better price
Just 2% of farmers report that shallots are sold to supermarket
35
Thank you!
Comments and suggestions welcome:
n.minot@cgiar.org
36

Urban Shopping Patterns Indonesia Implications

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Urban Shopping Patterns Indonesia Implications

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Copyright:

Verfügbare Formate

Urban shopping patterns in Indonesia

and implications for food security

Meeting Food Security Goals with Good Policy

INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE

Declining importance of rice and other staples

Animal products: meat, dairy, eggs, fish

Causes: rising income and urbanization

Transformation of agricultural markets

Growing importance of high-value agriculture

INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE

Number of outlets in Indonesia

Source: Dyck et al (2012) based on data from Euromonitor.

Effect of transformation on food security

Greater access to processed food with higher levels of sugar,

Growth of supermarkets will displace traditional shops

Effect of transformation on food security

Supermarket chains establish structured supply chains

Opportunities for small farmers

Challenges for small farmers

Markets for high-value commodities in Indonesia:

Study determinants and outcomes of participation of farmers in modern

Surveys of farmers of chilies, shallots, mangoes, mangosteen, & shrimp

Design of urban consumer survey

1180 urban households in three cities

Surakarta 300 households

Design of urban consumer survey

Household member characteristics

Types of food outlets

Very large, modern stores

Medium or large modern

Small, modern stores with

Types of food outlets

Vendor who sells from a table,

Small store selling food products in

Types of food outlets

Collection of numerous food

Small-scale vendors operating on

Food shopping patterns

Food shopping patterns

Food shopping patterns

Low price / value

Other reasons for going to hypermarket or supermarket include

Food expenditure data

7 rice and other grain products

Food shopping patterns

Food shopping patterns

Traditional wet mkt

Food shopping patterns

Other food products of interest

Food products for which less than 4%

Food shopping patterns

Food shopping patterns

Food shopping patterns

Determinants of share of food spending at

Per capita expenditure (log)

Per capita expenditure (log squared)

Own motorbike, car, or truck

Time to get to nearest modern retailer (min)

Education of head of household

Effect of income on..

Share of food spending at modern outlets

share of food budget

Projecting evolution of food retail sector

Increased demand for